Mortgage Banking

Making sense of commercial real estate finance.

Archive for June, 2008

Small Balance Apartment Lenders – Part 2

Posted by Jordan Crouch on June 17, 2008

(This is a follow up to a post in April. )

Within a certain loan size ($500,00 to $5 million) there has always been three main apartment lenders: Countrywide, WaMu, and World Savings. As Countrywide hit the brakes last year and the other two slowed down their lending at the beginning of this year, it was natural to assume another lender(s) would step up to fill the void. Finally, within the last month in fact, I’ve seen several lenders jump in. These lenders are offering streamline programs that include lower fees (compared to larger loans), 30-year amortizations, full recourse and an easy process.  Being that not many larger acquisition deals are getting done right now, this is another way for lenders to get money out the door.


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Newletter Chaos

Posted by Jordan Crouch on June 10, 2008

We were trying to get a newsletter out last week, and now, hopefully sometime this week it will be finished. This has proved more complicated and time consuming that anticipated. Hence my lack of posting here.

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Win-Win When a Lender Sells a Loan

Posted by Jordan Crouch on June 5, 2008

CoStar has an article about there being more opportunities to purchase loans, whether a whole loan, pieces of a loan or bundles of several loans. This is already happening and will continue to happen because it’s a win-win situation. It is often less expensive for a lender (or investor) to buy a loan from another bank, usually at a discount, than making a loan itself. For the lender selling the loan, it frees up cash to go out and make a new loan.

We are seeing this locally with smaller regional banks. Many lenders have reached their maximum allocation for construction loans and are stuck not being able to lend to their best customers. By selling off a loan or two or three, the bank now has money to lend to its customers, keeping them happy as well as possibly getting rid of a bad loan.

The real question is why is there a need to get rid of a loan? Perhaps the loan isn’t getting paid off in the usual time frame, or the borrower is having financial trouble, or the lender needs to clean up his balance sheet. There are several reasons why a lender would want to sell a loan. The CoStar article focused on CMBS lenders but the problems and opportunities are still the same regardless of size.

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Mid Year Predictions

Posted by Jordan Crouch on June 2, 2008

One CMBS lender’s prospective :

Short and long term rates have started to increase but we feel that long term rates will increase further than short term rates therefore steepening the yield curve.

Short term rates should not increase dramatically as the Federal Reserve is forced to keep the Federal Funds rate unchanged.  Given the high and rising oil prices we feel the Federal Reserve will continue with the easy monetary policy as increased Federal Fund rates would slow the economy.

In the last couple of weeks, the 10 Year Treasury has started to climb.  In January 2008 we said the 10 year Treasury was going to 4.5% by year end 2008.  We will wait and see if we get there but the 10 Year Treasury pushed through 4% and is headed higher.

CMBS(conduit) is still trying to get back in the game.  Spreads are 300 bps plus on all product types.

Fannie, Freddie and FHA are all very active, spreads have stabilized for now.

I agree with what he said. Short term rates will remain near the current levels because the FED cannot raise interest rates yet and risk slowing the economy. As the economy does improve, macro investors will move their investments from the longer term T-bills into other more attractive assets. With more investors selling their T-bills, the price will lower sending the corresponding T-Bill rate higher.

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